Fed Rate Hike jitters take toll on Gold

 Gold futures fell by more than 1.4 per cent in the domestic market on Wednesday as investors and speculators cut risky bets in the precious metal after bullish US labour market data bolstered bets of a US Federal Reserve interest rate lift-off for the first time in nearly a decade, in 2015, dimming the lure for the bullion as a store of value.

Private payrolls in the US advanced by an impressive 200,000 in September, up from a revised 186,000 last month, a sign that the American labour market recovery is progressing nicely and that the world’s biggest economy is weathering a global slowdown, paving the way for rate tightening by the Fed.

Fed Chair Janet Yellen last week backed the world’s top central bank to raise interest rates for the first time since 2006, later this year.

Gold, being a non-interest bearing asset, tends to lose sheen during a rising interest rate scenario.

A stronger dollar also curbed the appeal of gold as an alternative asset. Stronger greenback makes Gold more expensive for those holding other currencies, thus dimming demand.

Gold futures may extend a decline today as traders stay cautious ahead of tomorrow’s non-farm payrolls data which may show strength in the US job market, echoing the case for a rate hike by the Fed.

At the MCX, Gold futures for October 2015 contract closed at Rs 25,856 per 10 gram, down by 1.47 per cent after opening at Rs 26,212, against the previous closing price of Rs 26,243. It touched the intra-day low of Rs 25,760.

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